Yield Spread Premium

Yield Spread Premium is the amount of rebate paid to a borrower for accepting an interest rate that is higher than the par rate.

When a loan is originated, the borrower may be offered a variety of interest rates. If the borrower accepts a higher rate, the yield spread premium is a credit that can be used to reduce up-front loan costs. If a borrower pays discount points, they will receive an interest rate that is “below par.” If a loan is made “at par”, there is no yield spread premium or discount points.